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What do you think you mean by saying 'drives interest rates down'. It seems a leap to think the fed, the entity that establishes the interest rate, will react i
by apognwsi 1y ago
What do you think you mean by saying 'drives interest rates down'. It seems a leap to think the fed, the entity that establishes the interest rate, will react in the way you describe.
- wonderwonder 1y agoCommon misunderstanding but the fed does not set rates on treasuries (bills, notes, etc) the primary instrument the government uses to finance its debts. Those rates are set via auctions driven by the demand for safe haven returns on investments, particularly returns when equities are risky. As demand for treasuries (safety) goes up, the rates on those same treasuries go down. The fed sets the interbank exchange rates, these influence treasury rates but are a very different thing.
- apognwsi 1y agoi understand what you mean now. you are referring to the yield of treasury bonds, which, at least historically for <10 year tbills, do track the fed rate.